The tablet could have a 9-inch screen, may not have a camera and may run on the Android platform. While many Honeycomb tablets have been criticised for their high price, the report suggests Amazon could afford to make its tablet much cheaper in the hopes of gaining that money back through digital purchases.

Amazon won’t design this tablet and has reportedly outsourced its production to an Asian manufacturer. However, it may be working on another model of its own design for a release next year.

An Amazon tablet could be a strong contender in the tablet market, which Apple has dominated since 2010. With Amazon’s established position as an e-commerce giant and digital media distributor, this tablet could prove to be an attractive offer for consumers.

Tablets vs Kindle

One issue Amazon could face when releasing the tablet is how it can avoid cannibalising sales of its e-reader Kindle, as one source says they are not sure if a customer would choose to buy both.

The Kindle has faced strong competition against the iPad for a device to hold digital books and has positioned itself as a dedicated e-reading device with a screen without glare, which is easier to read in sunlight.

The Wall Street Journal’s sources also suggest Amazon may release two updated versions of the Kindle later this year. One of them will reportedly have a touchscreen.